Calls for Chancellor Rachel Reeves to introduce an exit tax on the wealthy are “fundamentally flawed,” warns the CEO of one of the world’s largest independent financial advisory and asset management organizations.
The warning from Nigel Green of deVere Group comes as economists and think tanks have urged Labour to implement the levy to raise as much as £500 million a year and discourage departures. The proposal comes as the government seeks to plug a mid-year deficit of £22 billion in the public finances.
“While this may sound like a quick fix to help close a £22 billion budget gap, the proposal not only falls short of addressing the core issues but risks pushing the UK into an economic trap that will have long-term consequences,” he says.
“The proponents of the exit tax are missing the point.
“At a time when economic growth needs a boost, and international competition for talent and capital is at an all-time high, this tax would do more harm than good.
“The problem that academics and policy advocates fail to acknowledge is that policies like this discourage people from coming to the UK in the first place.
“Worse still, it sends a negative message to the global investment community that the UK is hostile to wealth creators and innovators. It’s, therefore, fundamentally flawed.”
An exit tax, by its very nature, penalizes individuals who choose to relocate—often for perfectly legitimate reasons, such as family, business opportunities, or a desire for a new lifestyle.
By imposing a punitive measure on those leaving, the government may believe it is closing a revenue gap, but it overlooks the broader economic impact of such a move.
Wealthy individuals and families are not just high earners; they are also job creators, philanthropists, and investors in key sectors of the economy, including real estate, technology, and startups.
“Discouraging their arrival or encouraging their departure through punitive taxes risks undermining the very foundations of the UK economy,” notes Nigel Green.
Further, the exit tax proposal assumes that wealthy individuals have limited options. In today’s globalized world, that is simply not the case.
High-net-worth individuals have the resources to relocate to any number of countries offering more favourable tax regimes.
“If the UK introduces an exit tax, it will find itself in competition with nations like Switzerland, Singapore, and Dubai - countries that offer low taxes and a more welcoming environment for wealth and investment.”
In the long term, the exit tax could trigger a talent drain, with not just wealthy individuals but also businesses, entrepreneurs, and skilled professionals seeking more favourable environments elsewhere.
The deVere CEO continues: “This would result in a loss far exceeding the projected £500 million in annual revenue. The true cost would be a diminished tax-paying workforce, fewer investments, and ultimately, a less competitive UK.”
“Instead of introducing an exit tax, the government should be focusing on policies that encourage wealth creation and attract global talent.
“Rachel Reeves and her advisors should look at ways to make the UK a more attractive destination for high-net-worth individuals by improving infrastructure, simplifying the tax code, and reducing regulatory barriers that hinder business growth.”
The exit tax debate highlights a disconnect between academic theories and real-world economics. While it may appear, on paper, that taxing wealthy individuals as they leave the country could plug budget gaps, the long-term consequences are far more severe.
“Economists who champion this tax seem to forget that wealth is mobile, and that individuals and businesses will relocate if they feel overburdened or unwelcome.”
He concludes: The exit tax is a misguided proposal that may deliver short-term revenue but at the cost of long-term economic growth and competitiveness.”
